MUMBAI: Foodtech platform Zomato has shut down its Nutraceutical business. The development comes hours after the company decided to pull the plug on its grocery delivery business from 17 September, citing tough competition and moderate success.

In 2020, Zomato had started its nutraceutical business with the launch of health and fitness products. The decision comes at a time when the government is turning stricter about private label norms for marketplace businesses in the country. The online food marketplace had tapped into the nutraceutical opportunity related to food products that offer medical or health benefits last year, expecting it to be a large value driver for Zomato.

 Zomato had earlier announced its decision to stop its grocery delivery service effective 17 September, mainly on account of gaps in order fulfillment, leading to poor customer experience. It had launched the pilot grocery delivery service in July this year in select markets offering grocery delivery within 45 minutes to its customers. The company also said that it believes that its investment in Grofers will generate better outcomes for its shareholders than in-house grocery efforts.

In an email to its grocery partners, the online food delivery platform  said, "At Zomato, we believe in delivering best in class services to our customers and largest growth opportunities to our merchant partners. We don't believe that the current model is the best way to deliver these to our customers and merchant partners. Hence, we intend to stop our pilot grocery delivery service effective 17 September, 2021".

The email mentioned that "store catalogues are very dynamic and inventory levels change frequently. This has led to gaps in order fulfillment, leading to poor customer experience".

In the same time period, the express delivery model, with under 15 minute delivery promise and near perfect fulfilment rates has been getting a lot of traction with customers and expanding rapidly, the company further said in the email. "We have realised that it is extremely difficult to pull off such a delivery promise with high fulfilment rates consistently, in a marketplace model (like ours)," the mail said.

Zomato has invested $100 million (around Rs 745 crore) for acquiring a minority stake in grocery delivery platform Grofers.